Do The New Audit Reporting Standards Affect Auditor’s Audit Risk Sensitivity?

On December 23,2016,the Ministry of Finance approved the issuance of 12 Audit Standards(Abbreviation: New Audit Reporting Standards),such as "Audit Standards for Certified Public Accountants of China No.1504-Communication of Key Audit Matters in Audit Reports",and required all A-share listed companies to implement these standards from January 1,2018.Do the New Audit Reporting Standards affect auditor’s behavior? In particular,how does it affect auditor’s audit risk sensitivity? At present,the academia has not given a clear answer.Therefore,from the perspective of auditor’s audit risk sensitivity,this paper empirically studies the impact of the New Audit Reporting Standards on auditor’s audit risk sensitivity,and further studies the conditions under which the New Audit Reporting Standards play this role.This paper chooses 4914 samples of A-share listed companies after elimination from 2016 to 2017 as the research object.From the perspective of auditor’s audit risk sensitivity,based on information asymmetry theory and reputation theory,this paper uses logistic regression to test the implementation effect of the New Audit Reporting Standards.In addition,this paper compares the impact of the new auditing reporting standards on auditors from different size accounting firms and auditors of auditing Listed Companies in different Market-oriented areas.The results show that:(1)After the implementation of the New Audit Reporting Standards,auditor’s sensitivity to earnings management risk has been significantly improved,but their sensitivity to financial distress risk and corporate governance risk has not changed significantly.(2)After dividing the sample according to the size of accounting firms,it is found that the auditors of large accounting firms are significantly more sensitive to financial distress risk and earnings management risk,but not to corporate governance risk;while auditors of small accounting firms are not significantly sensitive to the three types of audit risk,Therefore,after the implementation of the New Audit Reporting Standards,the increase of auditor’s sensitivity to financial distress risk and earnings management risk mainly exists in large accounting firms.(3)After dividing the whole sample into two groups: high Marketization level sample and low Marketization level sample,it is found that whether the New Audit Reporting Standards are implemented or not,auditor’s sensitivity will always be significantly improved to the financial distress risks of Listed Companies in high Marketization level areas,while the auditor’s sensitivity will not change significantly to the three types of auditing risks of Listed Companies in low Marketization level areas.The conclusions of this paper will help investors,regulators and policymakers to understand the effect of the implementation of the new audit reporting standards,and help them to have a preliminary understanding of the conditions under which the new audit reporting standards will play a role.In addition,based on the background of China’s auditing Market,this paper tries to give the empirical results of the applicability of the new audit reporting standards in the audit Market of developing countries.